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Versata saga settled with prejudice

After reaching the final stages, the Versata saga, a ray of hope for the judicial interpretation of certain GPL v. 2 provisions, has ultimately been settled outwith court.

Background

Versata Software Inc. prepared the ground for what may be regarded a set of landmark cases concerning the interpretation and consequences of the breach of certain GPL v. 2 conditions, when it sued Ameriprise Financial Services for allegedly violating a Master License Agreement (MLA) over the use of Versata´s Distribution Channel Management software (DCM). On Versata´s account Ameriprise had allowed third party contractors to use their access to the DCM software to create a competitive product.

The parties pit their strength against each other in what has become known as:

In this case Versata sued Ameriprise for breach of contract with the aim to terminate the MLA. Ameriprise counterclaimed arguing that Versata had breached a GPL copyleft requirement, since Versata´s DCM contained XimpleWare´s VTD-XML software, an open source product dually licensed under the GPL v.2 and a commercial license ,which should, in Ameriprise´s view, compel Versata to make the DCM source code freely available to all users including Ameriprise and its contractors. Versata, in turn, argued that breach of the GPL v.2 should be handled as a copyright claim that could a) not be brought by Ameriprise because it was not the copyright holder and b) not be heard by state court since it was reserved for federal court.

2) Versata v. Ameriprise et al., Case No. 1:14-cv-12, U.S. District Court, Western District of Texas. In this case Ameriprise removed the case to federal court to determine whether the case could indeed only be decided under copyright law. The court held that the GPL's copyleft provision imposed an obligation over and above what the Copyright Act required, e.g. an affirmative obligation to provide source code, rather than simply an obligation not to copy the software without permission. In other words, since the Copyright Act did not specifically protect the right of a software licensee to receive source code, it did not preempt a claim in state court to enforce that right.

Since the parties decided to settle the case at this stage, the judges did not have to decide on remedies, i.e. the world will not know whether the court would indeed have compelled Versata to release any derivative works of VTD-XML, an outcome highly doubted by Aaron Williamson, attorney at law at Tor Ekeland, P.C.

Instead XimpleWare, informed by Ameriprise, came into the picture:XimpleWare v. Versata, Aurea Software Inc., Trilogy Development Group, Inc., Ameriprise Financial Services, Inc., Ameriprise Financial, Inc., United HealthCare Services, Inc., Waddell & Reed, Inc., Aviva USA Corporation, Metropolitan Life Insurance Company, Pacific Life Insurance Company, The Prudential Insurance Company of America, Inc. (subsequently dismissed), Wellmark, Inc., Case No. 5:13cv5161, U.S. District Court, Northern District of California (San Jose).) In this case XimpleWare accused the defendants of infringing its patents on VTD-XML: Versata, by distributing DCM to Ameriprise in violation of the GPL; Ameriprise by providing DCM to independent contractors and the customers by providing copies of DCM to independent financial advisors and franchisees.

On top, XimpleWare brought a further case which has become known as XimpleWare v. Versata, Trilogy Development Group, Inc., Ameriprise Financial, Inc., Ameriprise Financial Services, Inc., Aurea Software, Inc., Case No. 3:13cv5160, U.S. District Court, Northern District of California. In this case XimpleWare sued the defendants for direct copyright infringement, unjust enrichment, unfair competition, and declaratory relief and sued Versata for contributory copyright infringement, violation of the Lanham Act (Trademark Law), breach of contract, breach of implied covenant of good faith and fair dealing and international interference with prospective economic advantage.

Up until settlement (10th February 2015) the dispute provided useful guidance on the interpretation of certain GPL v. 2 provisions particularly regarding the nature of “distribution” :

1) Is distributing code to independent contractors (i.e.parties, who themselves change, modify and distribute the code) covered by the GPL v.2?

2) What consequences ensue for customers of infringing parties, who themselves do not distribute the code?

3) Does the GPL v. 2 contain a patent license or only a copyright license, which would mean that simple “use” could amount to a patent infringement?

Both Judge Illston (Case No. 3:13-cv-05061, docket No. 61, at 5) and Judge Grewal (May 16, 2014), answered the first question in the affirmative holding that contrary to the arguments of Versata and Ameriprise, distributing code to independent contractors, constituted “distribution”. This is in line with FSF policy, since the GPL does not distinguish between contractors and other third parties.

Regarding the infringement claims of the customers (question 2) the courts held that the use of GPL v. 2 licensed code was not tainted for users who complied with the GPL provisions, even though they had received it from an infringing party, since the GPL v. 2 constituted a direct license from the owners in the intellectual property (here XimpleWare). Hence violation by one entity in the distribution chain (here Versata) did not affect the rights of the customers.

As to question 3, the court (November 25, 2014) vehemently denied any attempts of XimpleWare to argue that the GPL v.2 did not grant a patent license to users holding that “use” of any kind was permitted under the GPL v. 2.

Since the court did not grant leave to assert new claims (and the argument under question 3 was introduced as a new claim) the court did not reach the issue of whether the GPL v. 2 provides an implied license for the rights other than "use".

Neither did the court address what damages should be payable to Versata for copyright infringement.